The Karnataka Electricity Regulatory commission (KERC) has revised its wind tariff on 24th Feb 2015. The new tariff will replace the tariff calculated in KERC order dated 10th October 2013.

The new tariff has been calculated at Rs. 4.50 per unit, which was Rs 4.20 per unit calculated by KERC in its earlier order dated 10th October 2013.

The new tariff will be applicable for the projects established during the control period of five years commencing from 10th October, 2013. For the projects which have already entered into PPAs with ESCOMs from 10th October, 2013 and up to the date of this Order, the tariff as determined in this Order will be applicable.

The revision in tariff has taken place after honorable APTEL (Appellate Tribunal for Electricity ) in a hearing of a petition filed by Indian Wind Turbine Manufacturers Association (IWPA) found some irregularities (mistakes) in tariff calculation and directed the commission to revise the tariff determined.

The commission earlier through notification invited comments and suggestion on the issues of revising tariff for wind energy, which after the hearing held on 7th January 2014 has been finalized.

The Gujarat Electricity Regulatory Commission (GERC) in its orders Dated 16th Jan 2015, has given relief to the state distribution companies against their RPO compliance for the year 13-14. The summary of the GERC orders is given below:

Orders on GUVNL: GUVNL complied with 5.26% out of 6% obligations for non-solar and achieved 2.18% of Solar against 1% obligation. But overall attained a renewable purchase level of 7.44% against the RPO of 7%. Highlighting this the GUVNL requested before the commission to adjust its excess solar energy purchased into the non-compliance in the Non-solar part. While the Indian Wind Energy Association (IWPA) objected saying that this would result in loss for the wind generators as there is huge amount of Non-solar REC’s available for purchase.

The commission in its order granted the permission for adjusting the excess purchase by GUVNL from Solar against the wind and other category compliance saying that the solar energy is costlier than the Non-solar energy and further more purchase of non-solar renewable would result in an additional burden on consumers of the distribution licensee.

Order on MPSEZ Utilities – MPSEZ Utilities submitted that it is having a revenue gap and therefore the enforcement of RPO on them will further burden the deemed licensees of SEZ areas. The commission in the order said that looking to the nascent stage of operation of the deemed distribution licensees of SEZ and quantum of power requirement by them for fulfillment of RPO, which is very less, so the commission exempted the licensee from applicability of RPO for FY 13-14.

Order on Torrent Power ltd. – Torrent power submitted that it has complied with RPO of 4.55% in case of Non-solar against total 6%, and solar RPO of .07% against 1% in the regulation. Saying that due to non-availability of Renewable Energy and factors beyond control, which lead to shortfall in RPO compliance for FY13-14. And requested before commission to revise the RPO percentage of FY 13-14 to the actual targets achieved by the company. IWPA in its submission said that the distribution company had the option of redeeming REC’s from exchange, as huge no. of solar and non-solar REC’s are available for sell.

The commission in the order said that the petitioner has made sufficient efforts to fulfill the solar and non-solar energy and REC’s as well, also said due to non-availability of renewable energy and factors beyond controlled resulted in shortfall in RPO compliance. And said that any further purchase of REC’s will result in the burden for consumers hence we cannot force the petitioner to buy more REC’s. The commission ordered to revise the RPO of the petitioner company as non-solar RPO at 4.55 % and Solar RPO at 0.07 % for FY 2013-14.

The decision of GERC to allow the defaulted distribution companies, adjusting their non-renewable RPO with their excess solar energy, and waiving off RPO for Deemed Distribution licensees (Torrent Energy Ltd and MPSEZ Utilities Pvt. Ltd.), and also reducing RPO to match the extent of sourced energy, will adversely impact the REC market which is going through a bad stage.

These steps even though appear to be practical may give other states chance to be more lenient over RPO enforcement, which could result in effecting the renewable industry badly as they rely on strict RPO enforcement. The step of giving solar power beneficial treatment over other RE power could be discouraging to other RE generators. May be the stagnancy in the REC market is the result of domino effect started by GERC and some other regulatory commissions.

The GERC Order on GUVNL & MPSEZ can be accessed here, and the order on torrent power can be accessed here.

In an important development on the RRF Implementation front, the High Court of Madras has acceded to the request of affected wind developers. According to a circular on IWPA’s website, the Madras high Court has ordered a stay on the full implementation of CERC order on RRF.

The circular mentions that according to the court order, wind projects will need to continue to forecast and schedule their generation, but the court has stayed the collection of UI charges.

It is being expected that the decision on similar petitions in other courts also will follow similar suite. Continuing the scheduling and forecasting will eventually help meet the envisaged objectives of a mock trial, which was lately conducted and concluded in haste. Also, it will be important to keep a track of the implications, if a new order is applied retrospectively at a later stage.

Against the backdrop of the recent episode in which the United States dragged India in World Trade Organization (WTO) for local content requirement in JNNSM Ist phase, the ministry of new and renewable energy has come out with a bold step to incorporate 75 % local content in phase 2 of its solar scheme. Mr. Farooq Abdullah said – “We want to encourage domestic industry also. The bidding would start in the coming month”, giving signs that India is still keen in developing local green manufacturing market and expecting that WTO will turn US’s allegation in its favor.

Another important statement given with respect to the fledgling wind energy market in India was to reinstate the withdrawn accelerated depreciation mechanism. Hon’ble minister was spotted saying that the proposal for reinstatement would be taken up to the cabinet and the same will be pushed. He also asserted that MNRE has taken cognizance of the predicament of investments in wind energy and how the same is affecting the small and medium scale enterprises, which house a high capacity of captive wind power in the nation. Our blog-post on petition filed by IWPA recently can be assessed here.

Wind power majors of the likes of Suzlon, DLF etc. are now looking for buyers who can buy their wind portfolios which will provide an opportunity for the former to raise capital and abrogate a situation of indebtedness. Regulatory failure has left operating a wind farm a costly affair. On the other hand, the buyers are usually cash rich companies planning an expansion of their green portfolios. For these buyers, owning an operating farm poses less risk and higher returns in terms of already established performance.

According to a study by Bloomberg, DLF (a property developer company) agreed to sell 217 MWs of projects for 5.23 billion rupees. Ushdev Power Holdings Limited has plans to boost its wing generation capacity and is in talks with Suzlon Energy Limited to acquire 400 MWs over the next 15 months. A detailed article by Bloomberg, can be assessed by clicking here.

In the past few days there have been various petitions filed by wind bodies like IWPA requesting to reinstate the accelerated depreciation scheme (Click Here). WEGs are looking for an urgent regulatory push from the government to regain the sector’s sheen.